Delta Apparel Reports Strong Financial Performance In Fiscal Third Quarter And First Nine Months Of 2018
Supplier Delta Apparel, Inc. (PPAI 188431), headquartered in Greenville, South Carolina, has announced financial results for its fiscal year 2018 third quarter and for the nine months ended June 30. Net sales were up for both time periods, with third quarter sales of $112 million up eight percent from $104 million in the prior-year third quarter, and net sales increasing to $303 million in the first nine months of 2018 from $294 million last year, a three percent improvement. Sales for the first nine months were up nine percent year-over-year after adjusting for prior-year sales from the since-divested Junkfood Clothing business.
“We had a solid third quarter with overall sales and earnings growth despite some headwinds associated with the inflationary cost environment and well-documented challenges at retail,” says Robert W. Humphreys, Delta Apparel, Inc.’s chairman and chief executive officer.
Earnings in the third quarter increased nine percent to $0.62 per diluted share from $0.57 per diluted share in third quarter 2017. In addition, gross margins improved to 21.6 percent from 21.4 percent, driven largely by margin expansion in the basics segment.
A discrete provisional tax expense of $10.6 million in the first quarter stemming from the recent United States tax reform legislation resulted in a $0.25 loss per diluted share for the first nine months compared with earnings of $1.07 per diluted share in the prior-year period. Excluding the one-time tax expense, earnings for the first nine months were $1.18 per diluted share, up 10 percent year-over-year and up 23 percent year-over-year after excluding the prior year’s $0.11 per diluted share gain on the sale of the Junkfood Clothing business.
Delta Apparel’s basics segment’s revenue for the quarter was $90 million, a 14 percent increase over the prior year. Growth at both Delta Catalog and FunTees drove a seven percent increase in activewear sales for the quarter. The company reports that the sales growth in higher-margin fashion basics products seen in recent periods continued, with the premium Delta Platinum line gaining more customer interest and market share. Sales on activewear’s B2B ecommerce site also continued to escalate, with almost 30 percent growth for the quarter. Activewear gross margins improved to 18 percent from 16.6 percent in the prior-year quarter with higher selling prices helping offset raw material and other cost pressures in the market.
The fiscal year 2018 third quarter was the first full quarter of combined operation for Delta Apparel’s digital print and fulfillment business, DTG2Go (previously Art Gun), following its acquisition on March 9. The integrated DTG2Go business achieved third quarter sales growth of 167 percent over the prior-year period, with increased sales from existing customers and new customer launches contributing to the performance. DTG2Go opened its fourth manufacturing and fulfillment location during the quarter. The new facility, located on Soffe’s Fayetteville, North Carolina campus, further increased DTG2Go’s capacity and its consumer reach in the key northeastern market.
Third quarter revenue in the branded segment was $23 million, compared with $25 million in the prior-year period. At Salt Life, incremental sales with new national retailers and a double-digit increase in ecommerce sales were offset by the impacts of unseasonably cool, wet weather on demand in the independent sales channel, especially in key southeastern markets. While these conditions resulted in a sales decline of two percent for the quarter, gross margins held strong and drove solid profitability at Salt Life. Soffe sales declined about $1 million during the quarter but were up two percent year-over-year through the first nine months. The third quarter decline resulted primarily from lower sales in the military channel, offsetting growth with strategic sporting goods retailers through improved floor placement and increased demand for Soffe shorts.
Humphreys adds, “Overall, we are excited about the growth opportunities at Delta Apparel, Inc. driven by new products and category extensions, our broadening customer base, and our investments in the dynamic digital print market. Our manufacturing investments have created scale efficiencies and platform flexibility that are allowing us to both reduce costs and internally produce merchandise that we previously sourced. In addition, the Salt Life brand offers tremendous growth opportunities for our company as it continues to expand both geographically and into additional lifestyle categories. All things considered, we believe we are positioned for a strong finish to fiscal year 2018 and good momentum going into the new fiscal year.”